Insurance Executive Warns About ‘Hype’ for Value-Based Drug Pay

Rich Daly, HFMA senior writer/editor

Ways to build on early value-based drug payment models include focusing them on high-cost drugs with uncertain outcomes, according to the executive.

Sept. 13—Value-based payment for pharmaceuticals offers a possible pathway to control spiraling drug spending. But some are warning that those approaches may do little to counter the increases.

Harvard Pilgrim Health Care garnered headlines in 2016 for pursuing value-based payment deals with several drugmakers. For instance, the insurer obtained a conditional discount from Novartis based on whether a new treatment for congestive heart failure produced a specific decrease in
hospitalizations, according to a STAT
report.

Such deals have garnered increasing attention as insurers gird for a growing number of high-cost drugs. A 2017
survey of health plans, conducted by Avalere, found that 70 percent have favorable attitudes toward outcomes-based contracts (OBCs) with manufacturers. One-quarter of the health plans surveyed had at least one OBC in place, and another 30 percent were negotiating one or more.

But this week Michael Sherman, senior vice president and chief medical officer for Harvard Pilgrim Health Care, warned that such initiatives are still in the early stages. He said at a Washington, D.C., policy discussion that the insurer’s dozen or so such agreements are mainly “proof
of concept” pilots and warned “that the hype is getting a bit ahead of the pilots.”

“Part of that is just natural to the environment; people want to see results quickly,” Sherman said.

Practical limitations slowing the spread of OBCs include the need for patients to take a drug for six months to two years before results can be evaluated. Additionally, the proliferation of such models is limited by the tendency of pharmaceutical companies to take a careful approach, essentially
just “dipping their toes in the water,” he said.

“These [models] are part of the solution, but I don’t think that they are the entire solution,” Sherman said.

Others likewise warn about excessive expectations for such value-based payments.

“I have been skeptical about innovative contracts over the years in the sense that the hype has outpaced the reality,” said Peter Neumann, professor of medicine, Tufts Medical Center and Tufts University.

However, Neumann said he hoped that more such agreements emerge.

Limitations on the impact of the agreements include an inability to sharply reduce the cost of over-priced drugs. For instance, Sherman noted that an OBC might reduce by only 20 percent the amount paid for a drug that costs 300 percent of what it should (based on third-party value determinations).

“It’s better than the alternative, but it doesn’t really solve anything,” Sherman said. “That’s what I think a lot of people are picking up on and questioning.”

The new value-based models are just the latest way that insurers have sought to control drug costs, joining established methods such as prior authorization and narrow formularies.

“But if you’re trying to do that without limiting access for people who need it, you’re limited in how far you can go,” Sherman said, referring to traditional approaches. “So, we have been moving toward [OBCs] or performance-based contracts.”

Future Approaches

Ways to build on such value-based “experiments” include focusing them on high-cost drugs with uncertain outcomes, according to Sherman.

Such an approach is not necessary for Hepatitis C drugs, for example, Sherman said. High prices for those drugs have been driving national discussions about the threat of rising drug costs, but the treatments cure about 95 percent of patients.

Instead, value-based payment for high-cost pharmaceuticals with uncertain benefits could include setting their initial price at the benchmark established by a third party, such as the Institute for Clinical and Economic Review (ICER). Then, if treatments like a recently approved $475,000
CAR T-cell therapy prove ineffective in a patient, the drugmaker would pay back 90 percent of the payment.

“We haven’t seen that yet,” Sherman said.

Payment models could include up-front payments and rebates from drugmakers to payers if patients don’t meet certain survival time frames, or up-front payment followed by ongoing payments based on a patient’s status.

“These are not conceptually rocket science, but we haven’t seen any papers,” Sherman said.

Similar approaches are possible for payment models with diagnostics companies. An as-yet-uncompleted agreement between Harvard Pilgrim Health Care and one company offered to end coverage restrictions if the company guaranteed that the health plan’s costs would stay flat via offsets.

The Food and Drug Administration’s first-time approval in August of a cell-based gene therapy for cancer—which carries a massive price tag—opens a field of high-cost medications that are “begging for value-based agreements,” Sherman said.

Additionally, drugmakers could find broader willingness by payers to cover such drugs if the drugs are submitted for third-party recommendations based on value, he said.

Improvements Needed

Such third-party groups have drawn criticism for lacking the patient’s perspective when defining value.

Referring to ICER and other third-party organizations that insurers use to determine the value of the drugs they pay for, Alan Balch, PhD, CEO of the Patient Advocate Foundation, credited the groups for starting to reach out to patients through “patient engagement platforms.” They could build
on that effort by establishing ways to broadly incorporate patient-reported outcomes “in more meaningful ways—ways that matter to patients—into these frameworks,” Balch said.

Until that happens, the extent to which such value determinations should be used in plac e of formularies or other payer approaches is unclear.

“We still have a long way to go in understanding what is value and applying that concept,” Balch said.

Regulator ‘Pushback’

Without industry agreement on ways to reduce the cost of breakthrough therapeutics, the likelihood of government price regulation increases, Sherman said.

Medications consumed 25 percent of 2016 spending by Harvard Pilgrim Health Care, even as the share paid by beneficiaries has declined in recent years.

“The problem is if the individual isn’t paying for it, we all are, which for me as a health plan CMO is problematic because we’re getting tremendous pushback from the regulators, from employers, from everyone,” Sherman said.

As part of the regulatory approach, many states have advanced price-setting transparency statutes that will force drug makers to meet a patchwork of requirements demonstrating how they set prices across the country.

“I’d much rather see all of us work together to come up with a solution than [have] some regulatory solutions,” Sherman said.

Ways to build on early value-based drug payment models include focusing them on high-cost drugs with uncertain outcomes, according to the executive.

Sept. 13—Value-based payment for pharmaceuticals offers a possible pathway to control spiraling drug spending. But some are warning that those approaches may do little to counter the increases.

Harvard Pilgrim Health Care garnered headlines in 2016 for pursuing value-based payment deals with several drugmakers. For instance, the insurer obtained a conditional discount from Novartis based on whether a new treatment for congestive heart failure produced a specific decrease in
hospitalizations, according to a STAT
report.

Such deals have garnered increasing attention as insurers gird for a growing number of high-cost drugs. A 2017
survey of health plans, conducted by Avalere, found that 70 percent have favorable attitudes toward outcomes-based contracts (OBCs) with manufacturers. One-quarter of the health plans surveyed had at least one OBC in place, and another 30 percent were negotiating one or more.

But this week Michael Sherman, senior vice president and chief medical officer for Harvard Pilgrim Health Care, warned that such initiatives are still in the early stages. He said at a Washington, D.C., policy discussion that the insurer’s dozen or so such agreements are mainly “proof
of concept” pilots and warned “that the hype is getting a bit ahead of the pilots.”

“Part of that is just natural to the environment; people want to see results quickly,” Sherman said.

Practical limitations slowing the spread of OBCs include the need for patients to take a drug for six months to two years before results can be evaluated. Additionally, the proliferation of such models is limited by the tendency of pharmaceutical companies to take a careful approach, essentially
just “dipping their toes in the water,” he said.

“These [models] are part of the solution, but I don’t think that they are the entire solution,” Sherman said.

Others likewise warn about excessive expectations for such value-based payments.

“I have been skeptical about innovative contracts over the years in the sense that the hype has outpaced the reality,” said Peter Neumann, professor of medicine, Tufts Medical Center and Tufts University.

However, Neumann said he hoped that more such agreements emerge.

Limitations on the impact of the agreements include an inability to sharply reduce the cost of over-priced drugs. For instance, Sherman noted that an OBC might reduce by only 20 percent the amount paid for a drug that costs 300 percent of what it should (based on third-party value determinations).

“It’s better than the alternative, but it doesn’t really solve anything,” Sherman said. “That’s what I think a lot of people are picking up on and questioning.”

The new value-based models are just the latest way that insurers have sought to control drug costs, joining established methods such as prior authorization and narrow formularies.

“But if you’re trying to do that without limiting access for people who need it, you’re limited in how far you can go,” Sherman said, referring to traditional approaches. “So, we have been moving toward [OBCs] or performance-based contracts.”

Future Approaches

Ways to build on such value-based “experiments” include focusing them on high-cost drugs with uncertain outcomes, according to Sherman.

Such an approach is not necessary for Hepatitis C drugs, for example, Sherman said. High prices for those drugs have been driving national discussions about the threat of rising drug costs, but the treatments cure about 95 percent of patients.

Instead, value-based payment for high-cost pharmaceuticals with uncertain benefits could include setting their initial price at the benchmark established by a third party, such as the Institute for Clinical and Economic Review (ICER). Then, if treatments like a recently approved $475,000
CAR T-cell therapy prove ineffective in a patient, the drugmaker would pay back 90 percent of the payment.

“We haven’t seen that yet,” Sherman said.

Payment models could include up-front payments and rebates from drugmakers to payers if patients don’t meet certain survival time frames, or up-front payment followed by ongoing payments based on a patient’s status.

“These are not conceptually rocket science, but we haven’t seen any papers,” Sherman said.

Similar approaches are possible for payment models with diagnostics companies. An as-yet-uncompleted agreement between Harvard Pilgrim Health Care and one company offered to end coverage restrictions if the company guaranteed that the health plan’s costs would stay flat via offsets.

The Food and Drug Administration’s first-time approval in August of a cell-based gene therapy for cancer—which carries a massive price tag—opens a field of high-cost medications that are “begging for value-based agreements,” Sherman said.

Additionally, drugmakers could find broader willingness by payers to cover such drugs if the drugs are submitted for third-party recommendations based on value, he said.

Improvements Needed

Such third-party groups have drawn criticism for lacking the patient’s perspective when defining value.

Referring to ICER and other third-party organizations that insurers use to determine the value of the drugs they pay for, Alan Balch, PhD, CEO of the Patient Advocate Foundation, credited the groups for starting to reach out to patients through “patient engagement platforms.” They could build
on that effort by establishing ways to broadly incorporate patient-reported outcomes “in more meaningful ways—ways that matter to patients—into these frameworks,” Balch said.

Until that happens, the extent to which such value determinations should be used in plac e of formularies or other payer approaches is unclear.

“We still have a long way to go in understanding what is value and applying that concept,” Balch said.

Regulator ‘Pushback’

Without industry agreement on ways to reduce the cost of breakthrough therapeutics, the likelihood of government price regulation increases, Sherman said.

Medications consumed 25 percent of 2016 spending by Harvard Pilgrim Health Care, even as the share paid by beneficiaries has declined in recent years.

“The problem is if the individual isn’t paying for it, we all are, which for me as a health plan CMO is problematic because we’re getting tremendous pushback from the regulators, from employers, from everyone,” Sherman said.

As part of the regulatory approach, many states have advanced price-setting transparency statutes that will force drug makers to meet a patchwork of requirements demonstrating how they set prices across the country.

“I’d much rather see all of us work together to come up with a solution than [have] some regulatory solutions,” Sherman said.

HFMA RESOURCE LIBRARY

Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.

No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.

This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.

This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.

Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.

Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.

To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.

Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.

Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.

Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.

Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.

The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.

Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.

Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.

Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.

Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.

The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.

The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.

Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.

Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.

Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.

Read more about factors contributing to the changes in the post-acute marketplace and what it means for manufacturers, physicians, clinicians, patients, and post-acute facilities as they anticipate the transition to the second curve.

HSG helped the physicians and executives of St. Claire Regional in Morehead, Kentucky, define their shared vision for how the group would evolve over the next decade. As well as, develop the strategic and operational priorities which refocused and accelerated the group’s evolution.

The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
Though the clinics were of substantial size (they employed 98 physicians) and comprised of multiple specialists, the physicians functioned as individuals and the practices lacked any real group culture.

Clinical integration can be expensive, but it doesn’t have to be, as this four-step road map for developing a CIN proves. Does it have to cost millions to initiate a clinical integration strategy?
Contrary to popular belief, we have clients who have generated substantial shared savings and a significant ROI over time, without massive investments. Yes, some financial capital is required for resources the CIN providers can’t bring to the table themselves. But the size of that investment can be miniscule relative to the value it produces: improved outcomes and documentation for payers.

Today’s concerns about physician compensation are the result of the changing healthcare environment. The transition to value is slow, but finally becoming a reality. Proactive hospitals want to ensure that provider incentives are properly aligned with ever-increasing value-based demands.
This report focuses on the three big questions HSG receives about adding value to physician compensation; Why are organizations redesigning their provider compensation plans? What elements and parameters must be part of successful compensation plans? How are organizations implementing compensation changes?

Revenue Cycle Management has become an even more complex issue with declining reimbursements, implementation of Electronic Health Records, evolving local carrier determinations (LCD), and payer credentialing [The emphasis on healthcare fraud, abuse and compliance has increased the importance of accuracy of data reporting and claims filing).
The efficiency of a medical practice’s billing operations has critical impact on the financial performance. In many cases, patient billings are the primary revenue source that pays staff salaries, provider compensation and overhead operating cost. Inefficiencies or inaccurate billing will contribute to operating losses.

This publication identifies and outlines the necessary characteristics of a fully-functioning clinically integrated network (CIN). What it doesn’t do is detail how hospitals and providers can participate in the value-based care environment during the development process.
One common misconception is that the CIN can’t do anything significant until it has obtained the FTC’s “clinically integrated” stamp of approval. While the network must satisfy the FTC’s definition of clinical integration before single signature contracting for FFS rates and contracts can legally start, hospitals and providers can enjoy three key benefits during the development process.

Nearly half of all Medicare beneficiaries treated in the hospital will need post-acute care services after discharge. For these patients, a stay in an inpatient rehabilitation facility, skilled nursing facility or other post-acute care setting comes between hospital and home.

With the proper process, tools, and feedback mechanisms in place, budgeting can be a valuable exercise for organizations while helping hold organizational leaders accountable. Having a proper monthly variance review process is one of the most critical factors in creating a more efficient and accurate budget. Monthly variance reporting puts parameters around what is to be expected during the upcoming budget entry process.

Managing the cost of patient care is the top strategic priority of most hospital CFOs today. As healthcare shifts to more data-driven decision making, having clear visibility into key volume, cost and profitability measures across clinical service lines is becoming increasingly important for both long-range and tactical planning activities. In turn, the cost accounting function in healthcare provider organizations is becoming an increasingly important and strategic function. This whitepaper includes five strategies for efficient and accurate cost accounting and service line analytics and keys to overcoming the associated challenges.